Unit 1.3 - Lesson 1 Flashcards
What’s the difference between aims and objectives?
Aim = what you hope to achieve. Objective = the action(s) you will take in order to achieve the aim. Aims are general while objectives are specific.
Give examples of financial aims and objectives.
Survival, Profit, Market Share, Maximize Sales Revenue
and Financial Security
Give examples of non financial objectives.
Social objectives like reasonable price, good quality, contribution to welfare and better environment. There’s also Personal satisfaction and Independence and control.
What does survival mean in business?
A short term objective, typical for start up businesses, or when a new firm enters the market or at a time of crisis.
How to make the most profit possible?
By increasing revenue or decreasing costs.
Why do you need to maximize sales?
To enable survival or further growth.
What is market share?
To increase the volume or value of sales, measured as a percentage of the entire market.
What is customer satisfaction?
An objective to keep customers happy through good service or better products than the competition.
What are social objectives?
To help society as a whole and make sure the business has a positive effect on others.
What is a personal achievement?
To successfully set up, control and run a new business independently.
Give the profit equation.
Profit =Total Revenue – Total Costs.
Give revenue equation.
Revenue = quantity x price
Give total costs equation.
Total Costs = FC + VC
What is revenue a form of?
A form of cash inflow
How can a business generate cash inflow from non-trading sources?
From loans received, sale of assets, owners capital injected into the business.
What are costs?
The spending that occurs to set up and run a business.
Define fixed and variable costs and give examples.
Fixed costs are costs which do not change in relation to output. For example, Rent & rates for premises, Wages and salaries not linked to output, Marketing costs, Insurance, Product development costs.
Variable costs are costs which change as a result of changes in output. For example, Raw materials, Other bought in supplies, Wages linked to output.
Gross profit definition.
Sales revenue – Cost of sales = GROSS PROFIT. Gross Profit will always be the biggest TYPE of profit in a business. A company has not yet paid out for its day to day running costs e.g. wages
Net profit definition.
Gross Profit- expenses = NET PROFIT. The NET PROFIT will ALWAYS be smaller than the GROSS PROFIT.
